Business Standard

Investors’ desire for buybacks, dividends highest in 9 yrs: Bofa

Shareholde­rs tapped emerging market equities in March — the fastest pace since April 2017

- PUNEET WADHWA New Delhi, 20 March

Investors’ desire for companies to prioritise returning cash to shareholde­rs through share buybacks, dividends or mergers and acquisitio­ns (M&A) is at the highest level since July 2015, said a survey by Bofa Securities (Bofa). Nearly 30 per cent of respondent­s wanted companies to do so.

As many as 226 respondent­s with $572 billion worth of assets under management (AUM) participat­ed in the March fund manager survey (FMS), said Bofa. While 198 participan­ts with $527 billion worth of AUM responded to the Global FMS questions, 119 with $256 billion worth of AUM took part in regional questions.

“Macro bullishnes­s drove investors’ equity allocation to net 28 per cent overweight (the highest since February 2022), while allocation to cash fell slightly to net 5 per cent overweight (down from 6 per cent overweight earlier). On a relative basis, investors are the most overweight equities versus cash since November 2021,” said Bofa.

Investors tapped into emerging market equities in March at the fastest pace since April 2017, and into eurozone stocks at the fastest pace since June 2020. Global growth expectatio­n among the fund managers was at a two-year high. “Risk appetite” was at the highest level since November 2021.

“There has been a rotation into financials at the expense of the US, tech & consumer discretion­ary (cut by most since May 2015); risk appetite was also expressed via preference for low dividend stocks, which was at the highest level since December 2021. Two-thirds of the respondent­s said recession was unlikely in the next 12 months; ‘soft landing’ remained the consensus view at 62 per cent probabilit­y,” wrote Michael Hartnett, chief investment strategist at Bofa Securities, in a coauthored survey findings note with Elyas Galou, Anya Shelekhin and Myung-jee Jung.

As many as 40 per cent of respondent­s surveyed by Bofa (62 per cent in December 2023) now expect bond yields across the globe to head lower in the next 12 months. Inflation was seen as the biggest tail risk for markets by 32 per cent of the fund managers surveyed.

‘Magnificen­t 7’ (Nvidia, Apple, Microsoft, Amazon, Alphabet (Google), Meta Platforms and Tesla) stocks were the most crowded trade among fund managers (58 per cent), according to Bofa’s findings. They were followed by shorting China equities (14 per cent), long Japan equities (13 per cent) and long bitcoin (10 per cent).

As many as 45 per cent of global fund managers believe artificial intelligen­ce-related stocks are not in a bubble zone and 40 per cent think just the opposite, according to the survey.

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